Agencies Issue Volcker Rule Proposal

Days after it was leaked to the public, banking regulators released the official version Tuesday of a proposal implementing severe restrictions on banks' trading activities.

The Federal Deposit Insurance Corp. and Federal Reserve Board issued the proposal Tuesday morning, and other agencies implementing the provisions — required under the Dodd-Frank Act — were expected to follow suit. The public will have 90 days to comment on the proposal.

The restrictions on banks' trading are commonly known as the Volcker Rule, named for former Fed Chairman Paul Volcker, who first suggested the idea. Under Dodd-Frank, banks are generally banned from proprietary trading, although certain activities are permitted. The law also sharply curtailed banks' ability to sponsor or own interests in hedge funds and private-equity funds.

The agencies' nearly 300-page proposal would broadly define "proprietary trading" as well as what constitutes the types of sponsorship and investments in hedge fund and private-equity funds that would be prohibited. Certain investments would receive exemptions, including that done on behalf of a customer through advisory and asset-management services, and "de minimis" investments not exceeding 3% of a bank's tier 1 capital.

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